QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification No.) | |
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(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol |
Name of each exchange on which registered | ||
☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging growth company |
Page |
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PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
3 |
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3 |
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4 |
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5 |
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7 |
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8 |
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Item 2. |
16 |
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Item 3. |
26 |
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Item 4. |
26 |
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Item 1. |
27 |
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Item 1A. |
27 |
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Item 2. |
28 |
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Item 6. |
29 |
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30 |
September 30, 2020 |
December 31, 2019 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Short-term investments |
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Accounts receivable, net |
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Prepaid expenses |
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Income taxes receivable |
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Other current assets |
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Assets held for sale |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Operating lease right-of-use |
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Deferred income tax assets |
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Other assets |
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Assets held for sale |
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Total assets |
$ | $ | ||||||
LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
$ | $ | ||||||
Current portion of finance lease liabilities |
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Current portion of operating lease liabilities |
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Income taxes payable |
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Liabilities held for sale |
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Total current liabilities |
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Long-term debt and finance lease liabilities, net |
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Long-term operating lease liabilities |
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Long-term professional liabilities |
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Deferred income tax liabilities |
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Other liabilities |
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Liabilities held for sale |
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Total liabilities |
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Commitments and contingencies |
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Shareholders’ equity: |
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Preferred stock; $ par value; |
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Common stock; $ par value; |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Retained (deficit) earnings |
( |
) | ||||||
Total MEDNAX, Inc. shareholders’ equity |
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Noncontrolling i nterest |
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Total equity |
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Total liabilities and equity |
$ | $ | ||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2020 |
2019 |
2020 |
2019 |
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Net revenue |
$ | $ | $ | $ | ||||||||||||
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Operating expenses: |
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Practice salaries and benefits |
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Practice supplies and other operating expenses |
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General and administrative expenses |
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Depreciation and amortization |
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Transformational and restructuring related expenses |
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Total operating expenses |
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Income from operations |
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Investment and other income |
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Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Equity in earnings of unconsolidated affiliates |
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Total non-operating expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Income (loss) from continuing operations before income taxes |
( |
) | ||||||||||||||
Income tax provision |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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(Loss) income from continuing operations |
( |
) | ( |
) | ||||||||||||
Loss from discontinued operations, net of tax |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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Per common and common equivalent share data: |
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(Loss) income from continuing operations: |
||||||||||||||||
Basic |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
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Diluted |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
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Loss from discontinued operations: |
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Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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Net loss: |
||||||||||||||||
Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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Weighted average common shares: |
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Basic |
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Diluted |
Common Stock |
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Number of |
Additional Paid-in |
Retained (Deficit) |
Total |
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Shares |
Amount |
Capital |
Earnings |
Equity |
||||||||||||||||
2020 |
||||||||||||||||||||
Balance at January 1, 2020 |
$ | |
$ | $ | $ | |
||||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
Unrealized holding loss on investments, net of tax (1) |
— | — | — | ( |
) | ( |
) | |||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
Issuance of restricted stock and conversion of deferred stock to common stock |
( |
) | — | — | ||||||||||||||||
Forfeitures of restricted stock |
( |
) | — | — | — | — | ||||||||||||||
Stock-based compensation expense |
— | — | — | |||||||||||||||||
Repurchased common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
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Balance at March 31, 2020 |
$ | $ | $ | $ | ||||||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
Unrealized holding gain on investments, net of tax (1) |
— | — | — | |||||||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
Issuance of restricted stock |
( |
) | — | — | ||||||||||||||||
Forfeitures of restricted stock |
( |
) | ( |
) | — | — | ||||||||||||||
Stock-based compensation expense |
— | — | — | |||||||||||||||||
Repurchased common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
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Balance at June 30, 2020 |
$ | $ | |
$ | ( |
) | $ | |||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
Contribution from noncontrolling Interests (1) |
||||||||||||||||||||
Unrealized holding gain on investments, net of tax (1) |
— | — | — | |||||||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
Issuance of restricted stock and conversion of deferred stock to common stock |
( |
) | — | — | ||||||||||||||||
Forfeitures of restricted stock |
( |
) | ( |
) | — | — | ||||||||||||||
Stock-based compensation expense |
— | — | — | |||||||||||||||||
Repurchased common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
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Balance at September 30, 2020 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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(1) |
Presented within retained (deficit) earnings as the balance is immaterial. |
Common Stock |
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Number of |
Additional Paid-in |
Retained (Deficit) |
Total |
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Shares |
Amount |
Capital |
Earnings |
Equity |
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2019 |
||||||||||||||||||||
Balance at January 1, 2019 |
$ | |
$ | |
$ | $ | ||||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
Unrealized holding loss on investments, net of tax (1) |
— | — | — | ( |
) | ( |
) | |||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
Issuance of restricted stock |
( |
) | — | — | ||||||||||||||||
Forfeitures of restricted stock |
( |
) | — | — | — | — | ||||||||||||||
Stock swaps |
( |
) | — | ( |
) | — | ( |
) | ||||||||||||
Stock-based compensation expense |
— | — | — | |||||||||||||||||
Repurchased common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
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Balance at March 31, 2019 |
$ | $ | $ | $ | ||||||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
Unrealized holding gain on investments, net of tax (1) |
— | — | — | |||||||||||||||||
Common stock issued under employee stock option, employee stock purchase plan |
— | |||||||||||||||||||
Issuance of restricted stock |
( |
) | — | — | ||||||||||||||||
Forfeitures of restricted stock |
( |
) | ( |
) | — | — | ||||||||||||||
Stock-based compensation expense |
— | — | — | |||||||||||||||||
Repurchased common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
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Balance at June 30, 2019 |
$ | $ | $ | $ | ||||||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
Unrealized holding gain on investments, net of tax (1) |
— | — | — | ( |
) | ( |
) | |||||||||||||
Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
Issuance of restricted stock |
— | — | — | — | ||||||||||||||||
Forfeitures of restricted stock |
( |
) | — | — | — | — | ||||||||||||||
Stock-based compensation expense |
— | — | — | |||||||||||||||||
Repurchased common stock |
( |
) | — | ( |
) | — | ( |
) | ||||||||||||
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Balance at September 30, 2019 |
$ | $ | $ | $ | ||||||||||||||||
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(2) |
Presented within retained (deficit) earnings as the balance is immaterial. |
Nine Months Ended September 30, |
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2020 |
2019 |
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Cash flows from operating activities: |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Loss from discontinued operations |
||||||||
Adjustments to reconcile net income to net cash from operating activities: |
||||||||
Depreciation and amortization |
||||||||
Amortization of premiums, discounts and issuance costs |
||||||||
Stock-based compensation expense |
||||||||
Deferred income taxes |
( |
) | ||||||
Other |
( |
) | ||||||
Changes in assets and liabilities: |
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Accounts receivable |
||||||||
Prepaid expenses and other current assets |
( |
) | ( |
) | ||||
Other long-term assets |
||||||||
Accounts payable and accrued expenses |
( |
) | ( |
) | ||||
Income taxes payable / receivable |
( |
) | ( |
) | ||||
Long-term professional liabilities |
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Other liabilities |
( |
) | ||||||
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Net cash provided by operating activities – continuing operations |
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Net cash provided by operating activities—discontinued operations |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Acquisition payments, net of cash acquired |
( |
) | ( |
) | ||||
Purchases of investments |
( |
) | ( |
) | ||||
Proceeds from maturities or sales of investments |
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Purchases of property and equipment |
( |
) | ( |
) | ||||
Proceeds from sale of business, net of cash sold |
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Net cash used in investing activities – continuing operations |
( |
) | ( |
) | ||||
Net cash provided by (used in) investing activities—discontinued operations |
( |
) | ||||||
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Net cash used in investing activities |
( |
) | ( |
) | ||||
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Cash flows from financing activities: |
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Borrowings on credit agreement |
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Payments on credit agreement |
( |
) | ( |
) | ||||
Proceeds from issuance of senior notes |
||||||||
Payments for credit facility amendment and financing costs |
( |
) | ( |
) | ||||
Payments on finance lease obligations |
( |
) | ||||||
Proceeds from issuance of common stock |
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Contribution from noncontrolling interests |
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Repurchases of common stock |
( |
) | ( |
) | ||||
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Net cash used in financing activities – continuing operations |
( |
) | ( |
) | ||||
Net cash used in financing activities—discontinued operations |
( |
) | ( |
) | ||||
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Net cash used in financing activities |
( |
) | ( |
) | ||||
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Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||
Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ | $ | ||||||
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|
1. |
Basis of Presentation and New Accounting Pronouncements: |
2. |
Coronavirus Pandemic (“COVID-19”): |
3. |
Cash Equivalents and Investments: |
September 30, 2020 |
December 31, 2019 |
|||||||
Corporate securities |
$ | $ | ||||||
Municipal debt securities |
||||||||
Federal home loan securities |
||||||||
Certificates of deposit |
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$ | $ | |||||||
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4. |
Fair Value Measurements: |
Fair Value |
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Fair Value Category |
September 30, 2020 |
December 31, 2019 |
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Assets: |
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Money market funds |
Level 1 | $ | $ | |||||||||
Short-term investments |
Level 2 | |||||||||||
Mutual Funds |
Level 1 |
September 30, 2020 |
December 31, 2019 |
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Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
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Liabilities: |
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2023 Notes |
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2027 Notes |
5. |
Accounts Receivable and Net Revenue: |
September 30, 2020 |
December 31, 2019 |
|||||||
Gross accounts receivable |
$ | $ | ||||||
Allowance for contractual adjustments and uncollectibles |
( |
) | ( |
) | ||||
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$ | $ | |||||||
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2020 |
2019 |
2020 |
2019 |
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Net patient service revenue |
$ | $ | $ | $ | ||||||||||||
Hospital contract administrative fees |
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Other revenue |
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$ | $ | $ | $ | |||||||||||||
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2020 |
2019 |
2020 |
2019 |
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Contracted managed care |
% | % | % | % | ||||||||||||
Government |
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Other third-parties |
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Private-pay patients |
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% | % | % | % | |||||||||||||
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6. |
Business Combinations, Assets Held for Sale and Discontinued Operations: |
September 30, 2020 |
December 31, 2019 |
|||||||
Assets |
||||||||
Accounts receivable, net |
$ | $ | ||||||
Prepaid expenses and other current assets |
||||||||
Property and equipment, net |
||||||||
Operating leases right-of-use |
||||||||
Goodwill |
||||||||
Intangible assets, net |
||||||||
Deferred income tax assets |
||||||||
Other assets |
||||||||
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|
|||||
$ | $ | |||||||
|
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|
|||||
Liabilities |
||||||||
Accounts payable and accrued expenses |
$ | $ | ||||||
Operating and finance leases |
||||||||
Long-term professional liabilities |
||||||||
Other liabilities |
||||||||
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|
|
|||||
$ | $ | |||||||
|
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|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Net revenue |
$ | $ | $ | $ | ||||||||||||
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|
|||||||||
Operating expenses: |
||||||||||||||||
Cost of service salaries and benefits |
||||||||||||||||
Cost of service supplies and other operating expenses |
( |
) | ||||||||||||||
General and administrative expenses |
||||||||||||||||
Depreciation and amortization |
||||||||||||||||
Transformational and restructuring related expenses |
||||||||||||||||
Goodwill impairment |
||||||||||||||||
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|
|||||||||
Total operating expenses |
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|
|||||||||
Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Non-operating income, net |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Income tax (provision) benefit |
( |
) | ( |
) | ( |
) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Net revenue |
$ | $ | $ | $ | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating expenses: |
||||||||||||||||
Cost of service salaries and benefits |
||||||||||||||||
Cost of service supplies and other operating expenses |
||||||||||||||||
General and administrative expenses |
||||||||||||||||
Depreciation and amortization |
— | |||||||||||||||
Transformational and restructuring related expenses |
— | |||||||||||||||
Goodwill impairment |
— | — | ||||||||||||||
Loss on sale, net |
— | — | ||||||||||||||
|
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|
|||||||||
Total operating expenses |
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|
|||||||||
Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Non-operating (expense) income, net |
— | ( |
) | ( |
) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Income tax benefit |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
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|
|
|
|
|
|
7. |
Accounts Payable and Accrued Expenses: |
September 30, 2020 |
December 31, 2019 |
|||||||
Accounts payable |
$ | $ | ||||||
Accrued salaries and bonuses |
||||||||
Accrued payroll taxes and benefits |
||||||||
Accrued professional liabilities |
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Accrued interest |
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Other accrued expenses |
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$ | $ | |||||||
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8. |
Common and Common Equivalent Shares: |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2020 |
2019 |
2020 |
2019 |
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Weighted average number of common shares outstanding |
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Weighted average number of dilutive common share equivalents |
— | — | ||||||||||||||
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Weighted average number of common and common equivalent shares outstanding (a) |
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Antidilutive securities not included in the diluted net income per common share calculation |
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(a) |
Due to a loss from continuing operations for the three months and nine months ended September 30, 2020, no incremental shares are included because the effect wou l d be antidilutive. |
9. |
Stock Incentive Plans and Stock Purchase Plans: |
10. |
Common Stock Repurchase Programs: |
11. |
Commitments and Contingencies: |
• | Clinician Shortage Support |
• | Strengthening of Supply Chain |
• | Expanded Virtual Care Offerings |
• | Early Virus Detection Using Cutting-Edge Imaging Diagnostic Tools |
• | Virtual Forum to Provide Clinician Support |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2020 |
2019 |
2020 |
2019 |
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(Loss) income from continuing operations |
$ | (2,652 | ) | $ | 12,887 | $ | (14,067 | ) | $ | 32,281 | ||||||
Interest expense |
27,250 | 29,909 | 83,180 | 91,271 | ||||||||||||
Income tax provision |
6,677 | 7,360 | 10,859 | 12,590 | ||||||||||||
Depreciation and amortization |
7,195 | 6,408 | 20,749 | 18,830 | ||||||||||||
Transformational and restructuring related expenses |
34,291 | 12,766 | 60,846 | 32,025 | ||||||||||||
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Adjusted EBITDA from continuing operations |
$ | 72,761 | $ | 69,330 | $ | 161,567 | $ | 186,997 | ||||||||
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Three Months Ended September 30, |
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2020 |
2019 |
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Weighted average diluted shares outstanding |
83,862 | 82,883 | ||||||||||||||
(Loss) income from continuing operations and diluted (loss) income from continuing operations per share |
$ | (2,652 | ) | $ | (0.03 | ) | $ | 12,887 | $ | 0.16 | ||||||
Adjustments (1) : |
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Amortization (net of tax of $601 and $444) |
1,802 | 0.02 | 1,333 | 0.02 | ||||||||||||
Stock-based compensation (net of tax of $1,132 and $1,902) |
3,398 | 0.04 | 5,706 | 0.07 | ||||||||||||
Transformational and restructuring related expenses (net of tax of $8,573 and $3,191) |
25,718 | 0.31 | 9,575 | 0.12 | ||||||||||||
Net impact from discrete tax events |
2,905 | 0.03 | 1,784 | 0.01 | ||||||||||||
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Adjusted income and diluted EPS from continuing operations |
$ | 31,171 | $ | 0.37 | $ | 31,285 | $ | 0.38 | ||||||||
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(1) |
Our blended statutory tax rate of 25% was used to calculate the tax effects of the adjustments for the three months ended September 30, 2020 and 2019. |
Nine Months Ended September 30, |
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2020 |
2019 |
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Weighted average diluted shares outstanding |
83,260 | 84,302 | ||||||||||||||
(Loss) income from continuing operations and diluted (loss) income from continuing operations per share |
$ | (14,067 | ) | $ | (0.17 | ) | $ | 32,281 | $ | 0.38 | ||||||
Adjustments (1) : |
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Amortization (net of tax of $1,632 and $1,289) |
4,896 | 0.06 | 3,867 | 0.05 | ||||||||||||
Stock-based compensation (net of tax of $4,550 and $6,893) |
13,652 | 0.16 | 20,672 | 0.25 | ||||||||||||
Transformational and restructuring related expenses (net of tax of $15,211 and $8,006) |
45,635 | 0.55 | 24,019 | 0.28 | ||||||||||||
Net impact from discrete tax events |
7,849 | 0.10 | (5 | ) | — | |||||||||||
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Adjusted income and diluted EPS from continuing operations |
$ | 57,965 | $ | 0.70 | $ | 80,834 | $ | 0.96 | ||||||||
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(2) |
Our blended statutory tax rate of 25% was used to calculate the tax effects of the adjustments for the nine months ended September 30, 2020 and 2019. |
Nine Months Ended September 30, |
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2020 |
2019 |
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Operating activities |
$ | 71,645 | $ | 36,237 | ||||
Investing activities |
(28,179 | ) | (33,729 | ) | ||||
Financing activities |
(3,496 | ) | (174,662 | ) |
Period |
Total Number of Shares Repurchased (a) |
Average Price Paid per Share |
Total Number of Shares Purchased as part of the Repurchase Programs |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Repurchase Programs (a) |
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July 1 – July 31, 2020 |
290,716 | (b) | $ | 17.65 | — | (a | ) | |||||||||
August 1 – August 31, 2020 |
— | — | — | (a | ) | |||||||||||
September 1 – September 30, 2020 |
19,873 | (b) | 16.14 | — | (a | ) | ||||||||||
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Total |
310,589 | $ | 17.55 | — | (a | ) |
(a) | We have two active repurchase programs. Our July 2013 program allows us to repurchase shares of our common stock up to an amount sufficient to offset the dilutive impact from the issuance of shares under our equity compensation programs. Our August 2018 repurchase program allows us to repurchase up to an additional $500.0 million of shares of our common stock, of which we repurchased $401.3 million as of September 30, 2020. |
(b) | Represents shares withheld to satisfy minimum statutory withholding obligations of an aggregate of $5.5 million in connection with the vesting of restricted stock. |
+ | Filed herewith. |
* | Furnished herewith. |
MEDNAX, INC. | ||||||
Date: November 6, 2020 | By: | /s/ Mark S. Ordan | ||||
Mark S. Ordan | ||||||
Chief Executive Officer | ||||||
(Principal Executive Officer) | ||||||
Date: November 6, 2020 | By: | /s/ C. Marc Richards | ||||
C. Marc Richards | ||||||
Chief Financial Officer | ||||||
(Principal Financial Officer) | ||||||
Date: November 6, 2020 | By: | /s/ John C. Pepia | ||||
John C. Pepia | ||||||
Chief Accounting Officer | ||||||
(Principal Accounting Officer) |